Okay. Afternoon, everybody. I'm Ken Usdin back here, the large cap banks analyst at Autonomous. Excited for our next session with Ronald O'Hanley, who's the Chairman and CEO of State Street Corporation. Ron has led the firm since 2019 after earlier roles as the President and COO, and also as the CEO of State Street Global Advisors when he joined the firm. State Street is among the largest asset servicers in the world, and asset managers as well, with $54.5 trillion of assets under custody and administration, and $5.5 trillion of assets under management. As we get going, just a quick reminder, you can put forth questions in the Pigeonhole app. Ron, thanks for joining us today. Appreciate it. Glad to be here, Ken. Great. Big picture to start, Ron. A lot of things going on in the world. You guys face all kinds of markets, in different places and different products. Can you talk about what you're seeing in terms of risk allocation, risk appetite, allocation shifts, activity levels, et cetera? How has the operating environment changed, and what are the couple of few swing factors that you think that can evolve as we look forward for the next six to 12 months? Yeah. Well, I don't need to tell you and don't need to tell anybody else, it's been a remarkable year, in terms of the geopolitical events that we've seen, many of them unexpected, and therefore the uncertainty that that's created. Underlying that has been, first and foremost, still very strong and continued economic activity, particularly in the U.S., but not just the U.S. As a result of this, coupled with the whole kind of AI secular boom, you've seen really strong investment activity across the board. Concerns about certain things like private credit, but really overall, the environment has been constructive. You see it in equity indices. For us, you know us well. We don't have a big credit exposure, so it's a constructive environment for us. It's constructive in a couple of ways, not just because of equity levels. Client activity, clients are investing, institutional clients, retail clients are investing, and that activity drives revenues for us. It's been a very constructive environment. Obviously, we operate in the environment we're in, but we prepare for something that's worse. We're being very vigilant, really watching the Middle East for a couple of reasons. We've got a significant business there, but obviously, the more important thing is what actually happens with the Straits and what does it mean for the knock-on economic effect, particularly around inflation. We're watching for all that. In terms of how it's affecting us and our performance, I would say that it's been neutral to positive. Yeah. Thinking about State Street from a strategic perspective, it's been nine straight quarters of positive operating leverage. Pre-tax margins have been improving over the last couple of years now. As you're looking ahead and planning and giving us a strategic update in July, what do you see as the hallmarks of a successful next chapter for State Street? As you know, we are the most focused of the G-SIB banks, we really are organized to serve the investor. We either manage money for the investor, or we service the investor's assets. We think about our strategy on a go-forward basis, really in kind of three parts. First is just powering the existing franchises. We've worked hard to build those franchises, and we see a lot of room for growth. Investment services, as large as we are, there's still plenty of share to gain. There's plenty of markets that we see growing. It's how do we continue to power that? What does that mean? It's around service quality. It's around building out the client-facing activities and continuing to strengthen the value proposition. In investment management, we're in the spaces that we want to be in, particularly at the core is the ETF franchise. ETFs have grown to be really the vehicle of choice, almost now the vehicle of choice worldwide. It's not just that. We have leadership positions in the institutional space, leadership positions in the retirement space, continuing to grow the product set there and power that franchise. Finally, markets. Markets, we do a few things, we do them exceptionally well. It's to support the investment services business. What do those institutional investors need? They need foreign exchange, they need securities finance, they need kind of collateral movement and control. Right? What we've done there is really haven't strayed from those businesses, have built up sub-products within it and, more importantly, distribution channels. That's number one. Number two is, what are the areas, we like to call them strategic frontiers. It's the edge of those existing franchises that we can push a little bit further. There's three of those. One would be digital. We could talk as much as you'd like around digital, if you see what's going on in digital and the digitization of finance, the role that a securities servicer like us plays in that intersection between securities processing and kind of cash settlement is a really important place to play. Secondly is around the continued rise in alternatives. We're a leading servicer there already. That world is just getting more complex. The complexity is driven by, a lot of it is the continued retailization of the channel. While there's been some concerns raised about that lately, I think all that's going to result in is different vehicles, maybe different vehicles that make more sense and address some of the semi-liquidity issues there. Also, what's driving the growth in that area is these firms were pretty simple when they got started. They might be a long-short firm, they might be a private equity firm. They're now all multi-product. They have big operational challenges to them. They have LPs, but each LP wants something different. Their complexity in back office has gotten greater, which is an opportunity for us. Thirdly, wealth services. As the world has moved from vehicles like the mutual fund, where you can have it just this way, to SMAs and almost mass customization, that creates a servicing challenge for the investment managers and again, an opportunity for us. The theme in both those two that I just described to you is this whole point of what we call One State Street, which isn't just a set of words. I began by talking about we have one client base, the investor. If you think about those three things, they link together, and the more services that we can provide clients, one, it locks the relationship in, but two, it establishes us with the client as their essential partner. Finally, what will really power all this for us is the next stage of transformation. As you know, we've been on a journey since I've been CEO, and we've made a lot of inroads there. AI, particularly this generation of AI, provides even more opportunity for us. What will power this, enable us to continue to gain more productivity, notwithstanding what we've done in the past, and enable us then to continue to reinvest in these franchises will be this next generation of AI transformation. Excellent. We'll deepen on a couple of those points as we go through it, and specifically on the transformation point and deepening on AI specifically. When you think about the future earnings power of the company, what should investors think about how AI starts to become measurable? Either in terms of outcomes for revenue linkage or primarily focused on productivity savings. How do you balance those two sides, and where do you think the biggest impacts will be? Yeah. It's a really good question. Maybe I'll start with our track record in transformation and the prior generation of AI, machine learning. If you think about over the last five years, we've saved and generated productivity savings of about $2 billion, most of which has been recurring. We have plowed much of that back into the business to be able to do what we're doing now, growing revenues, more products, et cetera. Much of that came from the deployment of things like machine learning in places like the striking of a NAV, a net asset value. Today, the machine does that a lot in developed market equities. If you think about it, machine learning is very basic relative to what we can get today in generative AI. We have a very substantial effort underway, really three parts to that. One is the ubiquitous kind of AI everywhere. Everybody's got it on their desk. Second is what we call inside our lighthouse projects. These are key. They started out as pilots. Now they're achieving some scale to them, where they've got repeatability elsewhere. An application that has a big impact in multiple areas, sometimes it's the customer-client interface, and sometimes it's around how do you think about operations and reconciliations. If you think about what we do, so much of it is around reconciliations. If you can do it once, you can, with the right data, apply it again. That's now being fostered by what we call our AI foundry. Where we're taking that from not just the AI and the data management, but to then move it on to agents. We've established what we call the AI foundry, which is to build these agents and then be able to use them on a repeatable basis. Finally, the third element of all this is each of the businesses and functions, we've charged them with a productivity goal, a multi-year productivity goal, and said, "In addition to everything else that we've just described, what you need to do is get to X number." Work with the technology team in terms of what's going to be unique to you, whether it's in compliance, whether it's in risk, whether it's in finance, and all the other areas. You're seeing the prior generation now. You'll start to see the impact of this towards the second half of 2026, and certainly throughout the next three years as we move forward. Last part of your question is a really important one, which is it just around cost? Right. It's not. If you think about what this data enables us to do, and the ability to mine that data and to quickly get to an insight, and think about the data that we sit on, we see it as a very significant opportunity for revenues. Places like markets, for example. We can look at the behavior of our clients and say, "Gee, where is it that they're trading away? We're their custodian, yet where are they trading away?" We can see a lot of that because we've got all that data and be able to very quickly say, "Gee, there's this one client that for whatever reason doesn't trade yen with us. Let's understand why that is, and maybe they just don't understand how good we are and the presence that we have there in Tokyo. That's where we see those kinds of on the ground, very quickly available to the frontline revenue people, and here's what we can do there. Okay. Now let's talk a little bit more about the individual businesses that you walked through in your prior answer, just about asset servicing first, investment servicing. You've spent a few years now really overhauling the sales process, transforming the business, pivoting towards that enterprise outsourcer model. When you think about the franchise, can you talk about the strategic areas of focus, a few of which you hit on just before? What are the upside areas over time you can see? You've got this goal to deliver $350 million-$400 million annual servicing fees. What do you need to do to kind of move that bar even that much further with the products that you're coming up with and the transformation? Yeah. $350 million-$400 million is a big number. Big number. If you go back five years ago, it was $250 million. Go back seven years ago, it was under $150 million. Yep. It's an ambitious goal, and what we're focused on now is achieving that. Yeah. We were just under that last year. We were just over it the year before. We've got a lot of confidence. Why do we have confidence in it? Firstly, it all comes down to service quality, and we're talking about servicing fees here, investment services. In the end, if you don't have quality, you end up in a real bind. Even if the client doesn't want to leave you, doesn't want to go through the switch, they're going to grind you on fees. They're going to grind you on price. We've invested heavily in service quality and have been doing that since 2019. That has actually paid off. It gives you the right to, one, retain the business, but so much of our business is more business from existing clients. You become easy to do that with. That's why we have a lot of confidence in this. Our service quality has never been higher, and so that will be one driver. Second, you alluded to this, we just had to overhaul the sales force and how we think about even relationship management, and to help our people understand that, yes, you're here to deliver superb service, but you're also here to grow that book of business. We put the right kind of people in, put the right kind of incentives, put in repeatable processes. You'll hear that theme a lot from me, that much of what we do, almost everywhere we do, is how can we build it right once and then repeat it elsewhere. We do that a lot in the operations area, but we do that also in our client-facing areas, too. We build a team approach and say, "Okay, we've got that now in the U.S. How do we extend that to Europe? Yep. A lot of the conversation in the industry has moved towards tokenization, digital assets, the new frontier. How do you see this changing the landscape between the traditional custodians, market infrastructure players, new potential entrants, as you start to roll out the digital side of your platform? It's a very exciting time, and I mean that in the truest sense because there is a long-term overhaul of financial infrastructure underway, and 10 years from now, there'll be much of it that we'll recognize. We'll see the same kinds of assets, but the form that they'll be in will be different. Much of that will be around tokens. Why are tokens important? For some assets, like real estate, they make the asset much more marketable, much more tradable. It'll help secondary markets. You could see the same, by the way, in private equity. If you think today about why is there so much money available in secondaries, it's because there's just this complete lack of transparency of what you're buying, particularly if you're trying to buy something or sell something quickly. Okay, that was the NAV that was struck way back then. A quarter ago, a lot's happened. I'll give you a 20% haircut on that and we'll buy that. Oftentimes, that's what the market is. Tokenization will help that. You'll also see it change things like, for example, money market funds. In the U.S. now, money market funds constitute about $8 trillion in cash. That's a lot of money. If you think about it, a traditional money market fund can't be posted as collateral. Right. Tokenization enables that, so enables the kind of mobility that you haven't been able to see before. The use cases are just more and more and more. The challenge is that it's like any other kind of long-term conversion. There's the traditional finance and there's a digital finance, and it'll be a long tail from truly where it is now to truly digital. The initial few years, where we are now, it's that bridge from traditional finance to digital finance and back. Second, for us, Ken, we sit at the interface between security settlement and cash settlement, and if you think about where much of the advances have already occurred, they've been on the cash side. whether it's stable coins or otherwise. To be able to marry what's a much, much newer kind of payment system to what's a much more established kind of securities processing system, that's the role that we play. That's where we see it in these early days over the next three to five years. What we don't see changing, and you're even seeing it now in the debate around the Clarity Act, what we don't see is, I think there's a recognition that segregated custody is actually a really important thing. Why is that important? If you think about all the named financial crisis, call it Ponzi, call it Madoff, call it Sam Bankman-Fried, what was the distinguishing characteristic of each of those? There was no segregated custody. We see that being embedded in all that, which will certainly help preserve custody as we see it now, but also is really important for investors going forward. Yeah. Those established moats, connections, assets, is that what gives you the confidence that a traditional provider can maintain that connectivity, maintain the client base, as opposed to a new, novel competitor that comes up and about? That's a question that comes up a lot is like, what's the advantage that you continue to retain? Yeah. It's a good question because, yes, segregated custody will be important, but to the extent to which the custodians stand still and don't understand that they need to be building these digital asset platforms, that they need to be modernizing their infrastructure, and they need to be doing it really quickly. I think the advantage, if anything, is that the world is not fully digital now, so you have to have both the digital platform and the traditional platform. It doesn't take away the investment requirement in terms of what we need to do in terms of being at the forefront of digitization. Right. Okay. On the investment management side, your net new asset growth has been really strong. Outside of ETFs, what do you see as the main growth drivers, either by client, sector, or geography product? Yep. In terms of client sectors, as you know, traditionally we're an institutional provider, and we still have a very strong position serving institutions worldwide in these core, whether it's truly index products or the core quantitative products. Second is retirement. We're the fourth-largest target date fund provider. That has become the vehicle of choice and the strategy of choice, really, around the world. We have a lot of innovation in there. We were the first to put income protection into a target date fund, and that's now getting some traction. Certainly in the U.S., there's much more favorability in the Department of Labor around those kinds of things, that outside the U.S., that's recognized as, "Yeah, that's pretty smart. Let's put some income protection in there and worry about decumulation as much as we worry about accumulation of assets. That would be one. Secondly, we've got a global footprint. We're in the markets that are growing. We've got not only the positions that we have in places like the U.S., Europe, and developed markets in APAC, but we're also in places like the Middle East, places like Southeast Asia, where you're seeing lots of growth. We're also in the big retirement markets. We're a leading player now in Australia, which continues to grow and probably has the most established retirement system out there. We see growth there. There's a real product innovation machine that exists in State Street Investment Management. The kinds of new products that we're seeing, well, I talked about income into a target date fund. Some of the work that we've done with partners like Blackstone, like Apollo, like Bridgewater, in terms of creating products, not just ETFs, but non-ETFs that actually bring the best of both those worlds together. We see, because of those spaces that we're in, even outside of ETFs, we see lots of growth potential at SSIM. Yeah. On the ETF side, what once was thought was a bit of a race to zero, you've continued to expand the product set and grow the asset class a lot. What is the most important parts about the strategic positioning of the ETF platform, including some of the work that you've done with the SPDRs products specifically? Our franchise is unique in that it started out as an institutional franchise, SPY, and then the big SPDRs sector funds, and they are the vehicle of choice for institutions. The hallmark of that is if you think about notional value, right? First quarter, SPY alone, $3.2 trillion in notional value. That's nine times our nearest competitor in terms of what they saw. That's 17% of all traded ETF volume. That's 6% of all traded equity volume. It is the vehicle of choice for institutions when they're trying to put positions on, take positions off, put options on, et cetera. What we've had to do over the last years, and I'll acknowledge we got a slow start in this, but once we got started, was around the wealth market. Today, about $1.7 trillion of our assets under management are somewhere in a wealth portfolio. SPYM, which is basically the low-cost SPY, was the largest growing ETF in the world in the first quarter in terms of asset gathering. It's recognizing those barbells, creating products that are fit for purpose of each, taking products that we have in some markets and extending them. If you think about gold, GLD, which is the leading gold ETF here in the U.S., we have successfully taken that to other gold markets like Japan and places like that. There's product extensions. Finally, going back to geography, after a long time where people just said, "Well, ETFs are not going to be a thing in Europe because, quote, 'there's not a tax advantage.'" There isn't a tax advantage. Nonetheless, it's become the attractive vehicle there, particularly as you're starting to see the rise in many developed markets of wealth channels outside the established channels. In the U.S., it was the wirehouses to RIAs. In Europe, it's banks going to the independents. That's already started in the U.K. When you get the fintech platforms out there, they love ETFs, so it's having fit-for-purpose kinds of products for them. All of that we see driving a lot of growth. It's really successfully migrated over to fixed income. Again, after a lot of skepticism, I think there's a recognition now that it's at least as good as any other pooled vehicle and probably better because, in the event of a crisis, what you can do in an ETF, which you can't do in a mutual fund in the event of a crisis, you can actually just distribute assets and just say, "We are not going to redeem. You're going to own that." Now, we haven't faced one of those kinds of crises, but in many respects, I think regulators have understood, yeah, that's actually a pretty good escape hatch, as opposed to have this doom loop of selling off all the good assets and leaving a fund with all the bad assets. Right. I n between all of this or along the way, you've developed the Alpha solution set, connecting your software services business to the asset servicing business. It's been fast-growing, it's been low double digits. As you evolve Alpha as that kind of all-in platform and think about it as an earnings driver, how should you position investors to understand how we should look at either the growth of the software business or just more so the growth overall of the entire solution set? How do we see that through the numbers? Yeah. I'm glad you worded it that way because that's exactly how we think about it. This was enabled by our acquisition of Charles River back in 2018, 2019. Why did we do that? First and foremost, because if you think about the space that we occupied already, we started out as a back-office player, built our middle-office business, but we wanted to basically complete that loop, if you will. Go from pre-trade right through to the middle office, through back office custody to performance measurement and reporting out to the client. It gave us that at the outset. Established player, not a lot of competitors in that marketplace. Formidable competitors, but not a lot of competitors. Not a fragmented market, one that's actually one where you can actually get a strong position. We also did it for what you just described, which was, we can now offer to clients who are increasingly seeking some less complexity in their own operation, a true front-to-back solution. Why is that important? So many of these institutions, particularly the large asset managers, but also the large asset owners, were finding themselves in a lot of complexity in their own operations. Right? They were doing some things inside. Oftentimes they were in a high-cost location. Oftentimes they didn't have the scale. This tool, when combined with our middle office and back office kinds of capabilities, gave us the ability to offer what we call an interoperable open architecture front-to-back solution. What does interoperable mean? These large asset managers, they're using a lot of things from us, but there's other things they want to use. We built it from the ground up to be interoperable, whether it's data sources that you want to use, if you're using a different trading platform, if you're using Aladdin or Bloomberg, we can put that in there, too. Open architecture, as new things come along, new particular data sources or a new kind of trading or a risk evaluation kind of capability, we've got all that API technology in place so that we can plug it right in for you. The way we think about the business is in the front-to-back solution. It cements our relationship with clients. It makes the client relationship a lot more sticky. Yep. We tend to then attract more and more services from them. It's also a standalone. Charles River started out as a standalone software player and still is a standalone software business. That's where you see the annual recurring revenue coming in, the movement from on-premises kinds of software to the software as a service, and that kind of conversion continues. That's a nice recurring, somewhat diversified stream. It's not really subject to market effect kinds of things. It's priced as a software product. Yep. We will continue to invest in that. To that point, just when you think about that stickier, can you talk just about what stickier means in terms of does it just mean you hold onto the client longer or the contract longer? Is it a more profitable relationship because you've gotten that whole front to back? It is. Stickier for a couple of reasons. First of all, we've just extended the contracts. Back in the old days, with custody kinds of contracts, you'd do three, four, sometimes five, but probably the average were four-year contracts. We won't do anything that's below seven, and typically, they're even longer than that. That alone kind of gives you some stability in terms of even how you think about pricing it and the kind of contract you're going to have. That's one. Two, particularly when the middle office is involved, basically that's taking the back office of an asset manager or an asset owner and converting it over to what we do. It's a full outsource, and it's not impossible to reverse that, but it's pretty difficult to reverse that. That's why they're fairly long sales cycles, and we've learned a lot along the way. They're long sales cycles, but you also want to make sure that it's coming over in a way that we can scale it. Part of the reason why it's a long sales cycle is, okay, we understand what you want. You want it exactly like you have it now, but at a lower price. Those don't go together. Let's talk about that. There's a fair amount of engineering in that sales cycle, but the net result is something that's very sticky and a very strong client relationship. Yep. You mentioned earlier, the growth of the markets business, FX trading and other parts, and where you also even use a little bit of the balance sheet in there as well. As the market franchise grows, what's the biggest financial importance of that? Is it just to add to what we just talked about, the stickiness and the overall profitability? Is it to just add to overall growth? Is it to improve return? Does it fit all of those? None of those? How do you think about the placement of the markets business inside the franchise? Well, first of all, we think about it in terms of returns. Why does an investor own State Street? It's not because of the way we're putting the balance sheet to work, right? That's not what you're coming to us for. We think about it in terms of returns. Secondly, we think about it in terms of, again, how does it complement the relationship we have with clients? The vast majority of what we do in markets is to serve existing client relationships. Again, it goes back to one, if we're serving them well in the services area, it's very easy for a client to say, "Yeah, that makes sense. Let's do our foreign exchange with you. Let's do our securities finance with you." We think about it primarily about returns, secondly, about rounding out the client value proposition. Also, though, it's a competitive business. Again, it's a big markets business, but narrow. We talked about the areas that we're in. We're in foreign exchange, securities finance, and collateral movement and control. What we think about is how do we continue to bring technology there in foreign exchange. We'll meet you exactly the way you want to trade. If you still want to do it over the phone, and sometimes big kinds of things, if there's a big move that somebody's making, or a rebalancing that somebody's making, that still is an over-the-phone kind of thing, but most of it is all very highly electronic, it's highly automated and we've perfected all that technology. We continue to make, design, and build it in a way so that it's easy for our clients to trade with us. Coming back to the wealth services business that you mentioned before, last year you announced a partnership with Apex Fintech Solutions. Can you talk a little bit about what this will do to add to that growth you mentioned earlier in wealth, and what are the couple milestones that'll matter and that we'll be able to see over time in terms of that partnership working? Maybe I can begin the answer to that question by giving you context as to why we did it. Right. As I talked about earlier, if you think about in the ETF business, in SSIM, we are very much in the wealth business. A lot of our ETFs and products ends up in wealth portfolios. At Charles River, Charles River is both an institutional trading platform, but it's also a wealth platform. 20% of what it does, it actually sits on advisors' desks. Given that foothold that we have in wealth, as we think about how else are we going to grow and capitalize on this trend towards wealth services, right. We said wealth custody makes some sense here for us. A lot of the existing platforms are old. It's 20, 30, 40-year-old technology. What was attractive to us about Apex is this was built out of the box as digital. The first milestone that you'll see from us is this integration of what we're doing already in wealth with Apex. What does that mean? Integrating the technology, and the links, if you will, between Charles River and Apex to be able to have a beginning to end type of solution. Secondly, how do you think about the actual Apex platform as a distribution platform? The good news about a lot of the products that we offer, they're core building blocks within portfolios, and as long as they're priced properly and priced fairly to the client, you can have them as a default kind of thing. We view this as part of a continued build-out in wealth. We talked earlier, I think this is really the true secular trend of our industry as wealth continues to grow around the world and clients expect and demand just more customization. "I'm Ron, and this is my situation, and this is exactly what I need. This is my tax situation. This is my family situation. This is all those kinds of things. I want it customized." That servicing, to be able to do that right, will require the kinds of technologies that we have at Charles River that we're able to access now through our 20% ownership of Apex, and the agreements we have with them to be able to grow this wealth business. Okay. Talk about the balance sheet and capital. You've been pretty consistent paying out around 80% of earnings through a very consistent and growing dividend, and then opportunistic on the buybacks. How do you think about the balancing act between returning capital to shareholders versus using the balance sheet to further support the growth of the revenue base and the company overall? Yeah. We think about it probably as you'd like us to think about it. We think about it in terms of a waterfall. First and foremost is the dividend, which we truly do believe is a covenant and one that we're committing to grow. The last couple of years, we've grown it about 10% a year. I think this year it'll be 11, or what we recently announced. We begin with that. Second, we begin with investing in the business. What are the opportunities to continue to invest in the business? If you think about our franchise, it's narrow and deep. We can't afford to be anything but great in any one of those businesses. We're not like a big universal bank where we can have two or three businesses parked at any given time while they're being fixed. These have to be operating at a very high level all the time and just be really dominant franchises. It's how do we invest in the business. Then third from there is return to shareholders. M&A also figures in there, but that's a pretty high bar for us. If you think about the waterfall, it's dividends, reinvesting in the business, if there's opportunistic M&A to do, and then return to shareholders. Over the past couple of years. By the way, maintaining the kind of capital ratio that we want to. Yeah. We're conservative. We acknowledge it. We're conservative in that regard. We target around 10%- 11% of CET1, and we keep it at that level, at least for now. That's how we think about, and what's the overall return strategy of 80%. The investment in the business, whether it's balance sheet dollars or incremental expense dollars, how do you prioritize which mouth to feed or which mouths to feed? Yeah that shape shift over time? That's really what's driven a lot of the focus on cost and productivity over at least my time in this role, because we recognized that we needed to continue to invest in the businesses. State Street, in prior times, had grown through big acquisitions, which at the time made sense. Right? State Street had gone from almost no position, for example, in Europe, did the Deutsche deal back in the mid-2000s. Later, 2009 or so, IBT came up. These were big transformational deals, the reasoning the balance sheet made sense. It's about saying, "Let's create the pool of money off our productivity and just the returns from the business, and invest off the income statement," which has been most of what we've done recently. We do tuck-in kinds of things, and you've seen those. We just talked about Apex, right? Yep. That was a 20% investment, and we're very strategic about those. We don't want to just collect a bunch of things. They have to have a purpose, a strategic purpose for us. Sometimes that strategic purpose is these are very, very small things. We just want to understand the technology and see if we can deploy it, but even then, we do it with the idea that more likely than not, we would deploy it. That's how we think about it, and then returning capital to shareholders. Yep. You mentioned the high bar to do deals and referenced some of the bigger ones that you did in the past. What does a high bar mean to you in terms of need, desire, availability of things, whether it's small tuck-ins or bigger opportunities that come and go in front of you over time? Yeah. Obviously, if it's a small deal, you're willing to take more risk with it, right? You don't want to ever squander shareholder money, but if it's, "Gee, this is a digital technology that we think might make sense." We have a minority investment that's grown quite significantly in ZILO, which is a digital TA firm, and we're deploying that technology. We like it a lot. When you start to get into large M&A, what's the purpose of it? If it doesn't really advance the strategy in some meaningful way, for example, give us a product set that we don't have now, or give us a geographic kind of foothold or establish us that we don't have now. Again, that's a really high bar. The last time we did anything and looked at anything of significance would've been around Brown Brothers. Yep if the regulatory environment had been different, we would've been able to do that. That made sense because there was an ability to consolidate one of the last large-ish players in there. Yep That made sense. We look at an awful lot, so it's not that we don't have a pretty active team that works under John Woods, but as we like to say, we say no a heck of a lot more times than we say yes. It also seems that some of the properties that might have come up for sale over 15 years ago that are owned by large banks have become kind of bigger parts of those enterprises as well, to your point, that there might not be as much of those big-ticket things around as much as they might've been in the past. That's right. It's to the point now, you think about Europe, if you'd talked to us 10 years ago, maybe we would've said, "Sure, we'd love to do something else in Europe." We're an established player. We're the largest player in Luxembourg. We're the largest player in Ireland. We don't need to be buying anything there. Yeah. One more question on capital. Any initial thoughts from the recently re-proposed Basel III and G-SIB surcharge rules, and both how they look in finished form to you, or if they look like this in finished form, and what the potential impact is on State Street? As you know, the comment period is underway, and we're pretty confident it's going to come out looking a lot like it is now. What does it mean to us? On RWA, we think it's neutral to slightly positive RWA for us. Yep. There's some nice elements to it that we think, it certainly won't be negative in any way and should be positive for us. Secondly, on G-SIB, what we're seeing there is probably going to solidify our position right at the floor. Right? Again, it's things like the markets business have grown. We've kept an eye on that because we really don't want to come off that floor, but we see both the way they're going to be measuring it, in some ways, they're looking at things like, for example, wholesale funding. We think that's all going to be attractive and then keep us at that floor. Net net, we view it as a positive. Most importantly, this is a chapter, this is a book that needs to be finished and put on the shelf. It's been too long, and I'm very pleased with the way the Fed has taken the lead on this to get this done. Okay. A couple more strategic questions. One is that, we talked on it before with private markets being a big growth area inside the servicing business, but if we step out a lens on the alternative space in general, it being a big opportunity both for State Street as one of the biggest fee pools that's out there, how do you think that evolves over the course of time? Obviously, been a lot of movement inside different pockets of the alts world. As you face it, and as you try to go after the growth for you as a servicer, how do you expect that to just alter your opportunity set and how you approach it? Yeah. I think that the demand on the part of retail, affluent, and wealthy investors will only continue to grow for these kinds of alternatives. That creates an opportunity for somebody like us because it has to be put in some form of a structure that's different from the conventional GP, LP kind of thing. There's been a lot of noise lately around some of the existing products. I think the net result of that is not that they're going to go away. I think you'll see new products, and probably some that make more sense, that actually make it very clear to the investors that this is actually closer to illiquid than liquid. Hopefully, I would love to see the term semi-liquid go away. You're not going to see the need to have products there. That will create complexity that'll drive demand for us. Secondly, on the investment management side of this for us, the combination and the lines between alternatives and between private markets and public markets are blurring, and the most obvious place for that is credit. I think if you're an institutional investor now, you really don't think too much about my private versus public. You're thinking about: What's my exposure to credit? Where do I want to be on credit? How do I think about duration? All of that, and fill it in with public and private. Easy for institutions to do under the existing approach, harder for retail investors to do. We will continue to very carefully put out products that make sense with that. We did the work with Apollo. Last year, we did the work with Bridgewater and took their All Weather fund and worked with them for a long time to say, "Okay, how do we turn this into something that actually works on a daily basis?" That's done very well. We see lots of opportunity like that. If you go back to the discussion on digital and digitization, as you see more and more tokenization, and particularly as you see the continued rise of target-date funds, you could foresee target-date funds having a much richer mix of assets, particularly with tokenization in there. What tokenization does, it also enables on the margin, more liquidity in the fund, the ability to trade assets in and out much more quicker. Retirement investors are the truly long-term investors. around the world, whether it's in the U.S. or outside the U.S. Even if you think about the various financial crises we've seen, there's been very little, going back to the GFC, very little intervention. It's talked about a lot in the press, but the numbers actually show that people don't go into their defined contribution balances. It's got to be a real family emergency to do that. They ought to get an illiquidity premium, and so we ought to be putting products together that enable them to get that. That's one part of what'll drive all this. The second part of it, which I alluded to earlier, is what's happening is the big firms are getting bigger. They're becoming multi-strategy. Yep. The operational stress is on them, and these firms did not become who they are because they were operationally excellent. They became who they are because they're very, very good at investing. It's still largely a highly insourced marketplace, so the ability to move that from an insourced market to an outsourced market, to us, that's a trend that continues to grow, and we're seeing more of that. Finally on all this is asset owners. The large asset owners, particularly the big sovereign wealth funds, but even some of the large asset owners here in the U.S. increasingly act like asset managers. For them to do what they want to do in privates are going to need our help in terms of being able to provide the infrastructure for all that. Again, one of those secular tailwinds. We have a strong position in it, putting a lot of investment in it, and we see a lot of growth in that for us. Last question, which kind of maybe brings this all together and also points us towards the strategic update in July, is that you've really done a great job in the last year or two delivering positive operating leverage and managing the lines better between revenue growth and expense control. Yep funded in part by those productivity initiatives that you mentioned. How do you just feel that balance between expense discipline and growth when you kind of put this all together, everything we've talked about? Facing the pools of growth out there, wanting to build for the future, keeping the core lights on, but also being ready for whatever comes ahead of us. We have a very large investment agenda. We usually talk about this at the beginning of the year in terms of we talk about productivity. Here's our productivity target. We talk about that we're going to invest a lot of that in the business. Why are we investing in the business? We can grow revenue. That flywheel has started to work for us over the last couple of years, and we'll continue to do that. Now, for the last few years, we've also had a constructive market environment. We always think about what we call gray skies, right? We've got a plan in place to the extent to which, in fact, markets turn from-- They don't even need to go from positive to neutral because we typically plan around neutral. If they go from neutral to negative, then we've got a series of steps that we'll take, and there are certain investments that we won't make. We try and be smart about this. It's the further out investments or the ones that we could afford to delay for a period of time. You don't want to ever be so short-term that you're cutting everything off, which is why we're so focused on why we continue every year to take our productivity target and ramp it up a little bit more. In some ways, generative AI has come along just at the right time because I think I was getting concerned whether we're going to be able to do it. We see, given how operationally intensive we are, the ability to deploy that AI and actually get even more productivity that's different than we've done in the past. That algorithm, if you will, we believe, puts us in a place where to the extent to which we are in a gray sky kind of situation, we're going to be okay. We'll be able to cut back on some of those investments and continue to deserve the returns that our investors want from us. Perfect. Great. We're out of time, so please join me in thanking Ronald O'Hanley, and thank you very much for joining us today. Thanks, Ken. Thanks very much.